Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights
Marcus H. Miller
University of Warwick - Department of Economics; Institute for International Economics; Centre for Economic Policy Research (CEPR)
Keele University - School of Law; University of Warwick - Centre for the Study of Globalisation and Regionalisation (CSGR)
The World Economy, Vol. 30, No. 10, pp. 1491-1509, October 2007
What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The Judge in the Argentine case has, it appears, deftly exploited creditor heterogeneity - between holdouts seeking capital gains and institutional investors wanting a settlement - to promote a swap with a supermajority of creditors. Our analysis of Argentine debt litigation reveals a "Judge-mediated" sovereign debt restructuring which resolves key issues of Transition and Aggregation - two of the tasks envisaged for the IMF's stillborn Sovereign Debt Restructuring Mechanism. For the future, we discuss how Judge-mediated sovereign debt restructuring (together with creditor committees) could complement Collective Action Clauses in sovereign bond contracts.
Number of Pages in PDF File: 19
Date posted: September 21, 2007